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on Entrepreneurship |
| By: | Luca Barbaglia (European Commission, Joint Research Centre (JRC), Ispra (VA), Italy); Serena Fatica (European Commission, Joint Research Centre (JRC), Ispra (VA), Italy, Money and Finance Research Group); Caterina Rho (European Commission, Joint Research Centre (JRC), Ispra (VA), Italy) |
| Abstract: | We document that banks charge higher interest rates on loans granted to European small and medium-sized firms located in areas at high risk of flooding. The risk premium, at 6.4 basis points on average, rises with loan duration, and in the case of smaller borrowers and local specialised banks. By contrast, at-risk firms that rely heavily on intangible and movable assets do not face a higher cost of credit, reflecting lower vulnerability to physical risk. Realised flood risk increases SMEs’ financial vulnerability, as firms in flooded counties are more likely to default on their loans than non-disaster borrowers. |
| Keywords: | climate change, loan default, loan pricing, natural disasters |
| JEL: | G24 F21 D81 E22 E44 |
| Date: | 2024–07 |
| URL: | https://d.repec.org/n?u=RePEc:anc:wmofir:186&r= |
| By: | Pehr-Johan Norbäck; Lars Persson; Joacim Tåg |
| Abstract: | The creation and scaling of startups are inherently linked to risk-taking, with various types of owners handling these risks differently. This paper investigates the influence of an active venture capital (VC) market on startups’ decisions regarding research and scaling. It outlines conditions under which VC-backed startups prefer riskier, yet potentially more rewarding strategies compared to independent startups. VC firms, by means of temporary ownership and compensation structures, introduce ”exit costs” that make high-risk strategies more attractive to VC-backed startups. Moreover, an active VC market prompts startups to undertake higher initial risks, as VC firms provide support for pivoting after setbacks. Additionally, the presence of VC intensifies research risk among established firms, as their research initiatives are strategic complements to the risk choices of startups. |
| Keywords: | entrepreneurship, pivoting, research, scaling, venture capital |
| JEL: | G24 L26 M13 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_11178&r= |
| By: | Sefa Awaworyi Churchill (School of Economics, Finance and Marketing, RMIT University.); Simon Chang (University of Western Australia Business School, University of Western Australia.); Russell Smyth (Department of Economics, Monash University.); Trong-Anh Trinh (Centre for Health Economics, Monash University.) |
| Abstract: | This paper extends prior theory linking present-day sex ratios to present-day propensity for entrepreneurship among men backward in time to explore the long-run gender origins of entrepreneurship. We argue that present-day propensity for entrepreneurship among men will be higher in neighbourhoods which had historically high sex ratios. We propose that high sex ratios generate attitudes and behaviours that imprint into cultural norms about gender roles and that vertical transmission within families create hysteresis in the evolution of these gender norms. To empirically test the theory, we employ the transport of convicts to the British colonies of New South Wales and Van Diemen’s Land in the eighteenth and nineteenth centuries as a natural experiment to examine the long-run effect of gender norms on entrepreneurship in present-day Australia. We use a representative longitudinal dataset for the Australian population that provides information on the neighbourhood in which the participant lives, which we merge with data on the sex ratio in historical counties from the mid-nineteenth century. We find that men who live in neighbourhoods which had high historical sex ratios have a higher propensity for entrepreneurship. We present evidence consistent with the vertical transmission of gender norms within families being the likely mechanism. Arguments for policies to promote female entrepreneurship are typically couched in terms of gender norms representing a barrier to more women starting their own business. We present evidence consistent with gender norms contributing to gender differences in rates of entrepreneurship by being a spur for higher male entrepreneurship rather than a barrier to female entrepreneurship. |
| Keywords: | gender norms, sex ratios, entrepreneurship, Australia. |
| JEL: | I31 J21 J22 N37 O10 Z13 Z18 |
| Date: | 2024–07 |
| URL: | https://d.repec.org/n?u=RePEc:mos:moswps:2024-11&r= |
| By: | Naudé, Wim (RWTH Aachen University) |
| Abstract: | This paper identifies conceptual, methodological, and empirical flaws in the first African Entrepreneurial Ecosystem Index (AEEI) that was launched in 2024. These flaws limit the usefulness of the AEEI. Moreover, given that the both the notions of entrepreneurial ecosystems and composite indices are subject to subjectivity and are ad hoc, use of the AEEI can lead to simplistic policy conclusions; worse, a poorly constructed index can detract, mislead and be manipulated. It is concluded that if scholars are to embark on entrepreneurial ecosystem index building despite the concept lacking sound theoretical and empirical foundations, then it is best not to focus on the cross-country level, but to start at the sub-national level and follow best practice in composite index building. This will have the benefits of at least being more consistent with the ideas of entrepreneurship as being place dependent and that ecosystem measures should be concerned with what entrepreneurs want - and less on existing institutions. |
| Keywords: | entrepreneurship, Africa, entrepreneurial ecosystem, composite indices |
| JEL: | L26 L53 O55 |
| Date: | 2024–06 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp17075&r= |
| By: | BARRIOS Salvador (European Commission - JRC); DELIS Fotis (European Commission - JRC); LANDABASO ALVAREZ Mikel (European Commission - JRC) |
| Abstract: | We provide evidence on the differences in the effective tax rate by firm size, highlighting that effective tax rates tend to follow a bump-shaped curve, increasing from micro to small firms and then decreasing for medium to large firms. Our analysis, based on microdata from several EU countries, shows that both corporate and labour taxation follow this pattern. Econometric analysis reveals that a 1% increase in effective corporate taxation results in a 2.6% decrease in firm turnover growth, with new firms and micro firms being particularly affected. The negative impact of corporate taxation on firm growth is much larger for new firms compared to older firms, and this is especially pronounced in Spain, where a 1% tax hike leads to a turnover growth decrease of 8%. Examining the 2015 Spanish corporate tax reduction for new firms, we find that the reform's overall positive impact was insignificant for micro firms, suggesting the need for more targeted policies considering firm size, age, and ownership. |
| Date: | 2024–07 |
| URL: | https://d.repec.org/n?u=RePEc:ipt:taxref:202407&r= |
| By: | Andrea Colciago; Marco Membretti |
| Abstract: | We study the labor market effects of Temporary Barriers to Entry (TBEs). Esti- mates from a mixed-frequency Bayesian VAR show that TBEs: (i) reduce job creation by new entrants, but boost it for incumbent firms; (ii) persistently increase employ- ment concentration in large firms; (iii) temporarily reduce unemployment, but are recessionary in the long run; and (iv) mainly result from federal regulation. We build a macroeconomic model, featuring firm heterogeneity, endogenous entry and exit, and labor market frictions, which successfully reproduces the VAR evidence. The model shows that TBEs temporarily boost short-run economic activity by favoring existing firms, but are ultimately costly. Policy measures aimed at protecting incumbent firms, even if temporary, entail welfare costs. |
| Keywords: | Job Creation; Reallocation; Unemployment; Heterogeneous firms; BVAR |
| JEL: | C13 E32 |
| Date: | 2024–07 |
| URL: | https://d.repec.org/n?u=RePEc:dnb:dnbwpp:813&r= |
| By: | Maria del Sorbo (European Innovation Council, Bruxelles, Belgium); Carina Faber (European Innovation Council, Bruxelles, Belgium); Marco Grazzi (Dipartimento di Politica Economica, DISCE, Università Cattolica del Sacro Cuore, Milano, Italy); Francesco Matteucci (European Innovation Council, Bruxelles, Belgium); Miriam Ruß (Wuppertal Institut für Klima, Umwelt, Energie gGmbH, Wuppertal, Germany) |
| Abstract: | A novel analysis of the European Innovation Council (EIC) Accelerator pilot is presented, marking the first extensive examination of its selection process and the impact of its funding on deep tech ventures, in comparison to its predecessor, the SME Instrument. Utilizing applicant data from both programs, the study assesses the EIC’s effectiveness in targeting firms that align with its objectives of driving breakthrough innovation. The research reveals that the EIC Accelerator pilot attracts younger and smaller firms, in comparison to its predecessor. A significantly higher proportion of applicants are high tech and medium high-tech, indicating a strategic shift towards supporting cutting-edge technologies. Despite this shift, the analysis of funding determinants demonstrates a consistent pattern across both programs, emphasizing the influence of firm size, age, and patent portfolio. Further, a regression discontinuity design analysis is used to estimate the impact of funding during the EIC accelerator pilot on firm-level outcomes, such as patenting, revenue, or employment growth. However, the very recent launch of the program shrinks both the observations and the ex-post window, and due to large standard errors the point estimates are not significant at conventional levels. |
| Keywords: | Innovation Policy, Industrial policy, deep-tech, start-up, regression discontinuity, patent, firm growth |
| JEL: | O3 O31 O32 O38 L25 L26 |
| Date: | 2024–07 |
| URL: | https://d.repec.org/n?u=RePEc:ctc:serie5:dipe0037&r= |
| By: | Halil Ýbrahim Aydin; Cagatay Bircan; Ralph De Haas |
| Abstract: | Blended finance programs combine public and private funding to ease credit constraints of specific firm segments. While rapidly gaining popularity, little evidence exists on their economic impact. To address this gap, we match credit registry data with firm level tax records to trace out the impacts of a blended finance program for female entrepreneurs in Türkiye. Using a synthetic difference-in-differences estimator, we show that participating banks durably increase lending to women-both in absolute terms and relative to male entrepreneurs. The average treatment effect on treated banks' share of lending to female entrepreneurs is 22 per cent. Banks expand credit to existing borrowers, poach clients from competitors, and crowd in first-time borrowers. Female clients of treated banks increase net borrowing and investment, especially those with higher capital productivity. Beneficiary firms grow their sales and profits, diversify suppliers, and exit less. There are no discernible impacts on aggregate firm populations at the district level, reflecting the program's relatively modest scale. Implications for program design are discussed. |
| Keywords: | Blended finance; Credit access; Female entrepreneurship; Misallocation |
| JEL: | D22 G21 G32 H81 J16 L26 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:tcb:wpaper:2408&r= |
| By: | Esa A. Asyahid (Department of Economics, Faculty of Economics & Business, Universitas Gadjah Mada); Elan Satriawan (The National Team for Acceleration of Poverty Reduction (TNP2K)) |
| Abstract: | The dualistic market model suggests that self-employment in developing countries should be seen as a survival strategy that is taken by those who are locked out of the formal labour market rather than as a manifestation of entrepreneurial spirit. This study aims to provide empirical evidences on the nature of self-employment in Indonesia, and whether it is more appropriately seen as an entrepreneurial activity or merely as a survival mechanism, by examining self-employed workers’ characteristics and the determinants of entry and exit into the self-employment sector. Utilising individual-level panel data from the Indonesian Family Life Survey, this study finds that the self-employment sector in Indonesia is indeed better characterised as a survival strategy as in the dualistic market model. Moreover, entry into the self-employment sector arises in times of economic crisis, implying that it acts as an employment option, namely as a last resort. Consequently, instead of focusing on growing the business of self-employed workers, policies should be directed toward the relaxation of formal labour market entry constraints‒providing more decent jobs and protecting the livelihood of existing self-employed workers. |
| Keywords: | Self-Employment, Indonesia, Dualistic Market Model |
| JEL: | E26 J46 O17 |
| Date: | 2024–03 |
| URL: | https://d.repec.org/n?u=RePEc:gme:wpaper:202403002&r= |
| By: | İrem Güçeri; Xipei Hou; Jing Xing; Irem Guceri |
| Abstract: | We examine how investor-level tax incentives affect financing for start-ups using the introduction of a generous tax deduction for qualified angel and VC investment in China as a quasi-natural experiment. We find that the tax incentive increases funding for eligible start-ups, with stronger responses from larger and more experienced investors. The tax incentive leads to substitution between eligible and non-eligible investments. There is no evidence that the tax incentive lowers investment quality. We further show that the investor-level tax incentive encourages firm entry into affected industries, especially in cities more exposed to venture capital funds. |
| Keywords: | venture capital, angel investment, tax incentives, entrepreneurship |
| JEL: | G24 G32 H25 L26 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_11180&r= |
| By: | Ania Thiemann |
| Abstract: | Weak productivity in Egypt is rooted in deep-seated structural causes that impede market competition and prevent a more efficient resource allocation. This implies a number of challenges for economic policy to meet the objectives for long-term sustainable growth as set out in the National Structural Reform Programme, but the government is determined to tackle the issues, and is committed to increase the role of the private sector. Market mechanisms such as business entry and exit, and growth of the most efficient firms, appear to be weaker than in many similar emerging markets. Recent reforms have started to tackle heavy regulatory burdens and barriers that hinder market entry and encourage informality and should be pursued, while the judiciary system still requires improvement. Competition from abroad, and the attraction of foreign direct investment are hampered by trade barriers, implying that Egypt does not fully benefit from global value-chains and spillovers of technology and knowledge that would help lift productivity. The way state-owned companies are operating across a several sectors prevents private businesses from competing on a level playing field, although the government has recently started to take steps to level the playing field for all firms. Moreover, many businesses still face difficulties in accessing finance, as banks overwhelmingly prefer to lend to the government. Enhancing access to finance and improving digitalisation would contribute to a more competitive environment, lifting business sector growth. |
| Keywords: | access to finance, anti-corruption measures, Business climate, competition, corporate governance, digital diffusion, Egypt, foreign investment, informal economy, investment, judiciary efficiency, level playing field, network sectors, private sector development, privatisation, productivity, regulatory reform, resource allocation, SMEs, state-owned enterprises, tax incentives, trade barriers |
| JEL: | D24 E26 F13 F21 G21 G34 G38 H11 H25 K21 K23 K35 K42 L11 L14 L25 L26 L33 L40 L50 O19 O33 O53 |
| Date: | 2024–07–16 |
| URL: | https://d.repec.org/n?u=RePEc:oec:ecoaaa:1808-en&r= |